27 Nov 2012, Calypso, Risk magazine
A variety of new regulatory measures will soon be implemented that will have a dramatic impact on the use of collateral. Under an agreement reached by Group of 20 nations in September 2009, all standardised derivatives will soon need to be cleared through central counterparties (CCPs) - requiring derivatives users to post initial and variation margin to clearing houses. At the same time, regulators are working to finalise new margin requirements for uncleared trades.
Meanwhile, Basel III will require banks to hold a buffer of high-quality liquid assets - for the most part, comprising cash and government bonds. Taken together, it places a heavy demand on these forms of collateral - and some participants have questioned whether there are enough eligible assets to satisfy this need.
In this video interview, David Little, business development manager at Calypso, discusses some of the issues posed by regulatory change, and some of the potential solutions.